B-178591, B-178970, FEB 4, 1974

B-178591,B-178970: Feb 4, 1974

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BID WHICH OFFERED AIR FORCE SURPLUS UNITS THAT HAD BEEN OVERHAULED AND CERTIFIED SERVICEABLE BY AUTHORIZED FEDERAL AVIATION ADMINISTRATION REPAIR FACILITY WAS PROPERLY REJECTED AS NONRESPONSIVE TO SOLICITATION. WERE INCORPORATED BY REFERENCE. THESE CLAUSES ARE CONTAINED IN MASTER SOLICITATION DGSC P-97. WHICH WAS MADE PART OF EACH OF THE SOLICITATIONS. THE CONTRACTOR REPRESENTS THAT THE SUPPLIES AND COMPONENTS INCLUDING ANY FORMER GOVERNMENT PROPERTY IDENTIFIED PURSUANT TO THE 'GOVERNMENT SURPLUS' CLAUSE OF THIS CONTRACT TO BE PROVIDED UNDER THIS CONTRACT ARE NEW (NOT USED OR RECONDITIONED. THE CONTRACTOR BELIEVES THAT THE FURNISHING OF SUPPLIES OR COMPONENTS WHICH ARE NOT NEW IS NECESSARY OR DESIRABLE.

B-178591, B-178970, FEB 4, 1974

UNDER REQUEST FOR PROPOSALS FOR LIQUID QUANTITY INDICATORS AND LIQUID QUANTITY TRANSMITTERS FOR AIRCRAFT USAGE WHICH REQUIRED THAT EQUIPMENT BE NEW, UNUSED, AND NOT RECONDITIONED, BID WHICH OFFERED AIR FORCE SURPLUS UNITS THAT HAD BEEN OVERHAULED AND CERTIFIED SERVICEABLE BY AUTHORIZED FEDERAL AVIATION ADMINISTRATION REPAIR FACILITY WAS PROPERLY REJECTED AS NONRESPONSIVE TO SOLICITATION.

TO D. MOODY & CO., INC.:

REQUESTS FOR PROPOSALS (RFP) NOS. DSA400-74-R-0858, -3382, -3542, AND RFP NOS. DSA400-73-R-6430, -6431, -6506, -7660, -8101, AND -8189, ISSUED BY THE DEFENSE GENERAL SUPPLY CENTER, DEFENSE SUPPLY AGENCY, RICHMOND, VIRGINIA, REQUESTED OFFERS FOR FURNISHING SPECIFIED QUANTITIES OF LIQUID INDICATORS AND LIQUID QUANTITY TRANSMITTERS FOR AIRCRAFT USAGE. UNDER THE LIST OF THE GENERAL PROVISIONS OF EACH OF THE SOLICITATIONS, CLAUSES C13 AND C14, ENTITLED "NEW MATERIAL (1965 JAN)" AND "GOVERNMENT SURPLUS (1971 APR)," RESPECTIVELY, WERE INCORPORATED BY REFERENCE. THESE CLAUSES ARE CONTAINED IN MASTER SOLICITATION DGSC P-97, DATED JANUARY 31, 1972, WHICH WAS MADE PART OF EACH OF THE SOLICITATIONS. THE CLAUSES READ AS FOLLOWS:

"C13 NEW MATERIAL (1965 JAN) (ASPR 1-1208(A)). EXCEPT AS TO ANY SUPPLIES AND COMPONENTS WHICH THE SPECIFICATION OR SCHEDULE SPECIFICALLY PROVIDES NEED NOT BE NEW, THE CONTRACTOR REPRESENTS THAT THE SUPPLIES AND COMPONENTS INCLUDING ANY FORMER GOVERNMENT PROPERTY IDENTIFIED PURSUANT TO THE 'GOVERNMENT SURPLUS' CLAUSE OF THIS CONTRACT TO BE PROVIDED UNDER THIS CONTRACT ARE NEW (NOT USED OR RECONDITIONED, AND NOT OF SUCH AGE OR SO DETERIORATED AS TO IMPAIR THEIR USEFULNESS OR SAFETY). IF AT ANY TIME DURING THE PERFORMANCE OF THIS CONTRACT, THE CONTRACTOR BELIEVES THAT THE FURNISHING OF SUPPLIES OR COMPONENTS WHICH ARE NOT NEW IS NECESSARY OR DESIRABLE, HE SHALL NOTIFY THE CONTRACTING OFFICER IMMEDIATELY, IN WRITING, INCLUDING THE REASONS THEREFOR AND PROPOSING ANY CONSIDERATION WHICH WILL FLOW TO THE GOVERNMENT IF AUTHORIZATION TO USE SUCH SUPPLIES IS GRANTED.

"C14 GOVERNMENT SURPLUS (1971 APR) (DGSC)(A). IF THE BID OR PROPOSAL IS BASED ON FURNISHING ITEMS OR COMPONENTS WHICH ARE FORMER GOVERNMENT SURPLUS PROPERTY OR RESIDUAL INVENTORY RESULTING FROM TERMINATED GOVERNMENT CONTRACTS, A COMPLETE DESCRIPTION OF THE ITEMS OR COMPONENTS, QUANTITY TO BE USED, NAME OF MANUFACTURERS) (IF MORE THAN ONE INDICATE QUANTITIES OF EACH MANUFACTURER), NAME OF GOVERNMENT AGENCY FROM WHICH ACQUIRED, AND DATE OF ACQUISITION AND SUFFICIENT ITEM HISTORY TO GIVE POSITIVE ASSURANCE OF ORIGIN OF MATERIAL SHALL BE SET FORTH ON A SEPARATE SHEET TO BE ATTACHED TO BID OR PROPOSAL. ALSO, THE OFFEROR MUST FURNISH A STATEMENT AS TO WHETHER THE MATERIAL WAS PREVIOUSLY REJECTED/CONDEMNED. THE OFFEROR HEREBY CERTIFIES THAT THE MATERIAL OFFERED IS NEW, UNUSED, AND IS SERVICEABLE WITHOUT REWORK OR REFURBISHMENT OF ANY KIND. THE QUANTITIES OF MATERIAL INDICATED ABOVE ARE ON HAND OR READILY AVAILABLE FOR SHIPMENT. NOTWITHSTANDING ANY INFORMATION PROVIDED IN ACCORDANCE WITH THIS PROVISION, ITEMS FURNISHED BY THE CONTRACTOR MUST COMPLY IN ALL RESPECTS WITH THE SPECIFICATIONS CONTAINED HEREIN.

"(B) EXCEPT AS DISCLOSED BY THE CONTRACTOR IN (A) ABOVE, NO PROPERTY OF THE TYPE DESCRIBED HEREIN SHALL BE FURNISHED UNDER THIS CONTRACT UNLESS APPROVED IN WRITING BY THE CONTRACTING OFFICER."

THERE WAS NO PROVISION IN ANY OF THE SOLICITATIONS AUTHORIZING THE FURNISHING OF ANYTHING BUT NEW MATERIAL.

IN RESPONSE TO THE ABOVE-CITED RFPS, D. MOODY & CO., INC., OFFERED TO FURNISH AIR FORCE SURPLUS UNITS THAT HAD BEEN OVERHAULED AND CERTIFIED SERVICEABLE BY AN AUTHORIZED FEDERAL AVIATION ADMINISTRATION REPAIR FACILITY. SINCE THE SUBJECT RFPS DID NOT AUTHORIZE THE FURNISHING OF ANYTHING BUT NEW MATERIAL, THE PROCURING ACTIVITIES CONTACTED THE SAN ANTONIO AIR MATERIAL AREA, KELLY AIR FORCE BASE, TEXAS (SAAMA), THE RESPONSIBLE ENGINEERING ACTIVITY, BY TELEPHONE, WHICH ADVISED THAT COMMERCIAL OVERHAULED EQUIPMENT IS NOT SUITABLE FOR AIRCRAFT USAGE AND THAT SURPLUS MATERIAL MUST BE NEW, UNUSED, AND NOT RECONDITIONED. IN VIEW OF THE FOREGOING ADVICE, THE PROCURING ACTIVITIES DETERMINED THAT THE OFFERS SUBMITTED BY MOODY UNDER THE SUBJECT RFPS WERE UNACCEPTABLE.

THE RECORD INDICATES THAT THE ADVICE GIVEN BY SAAMA TO THE PROCURING ACTIVITIES WAS BASED ON THE PROVISIONS OF SAAMA-KAFB REGULATION 74-4 DATED MAY 4, 1973, WHICH PROHIBITS THE PROCUREMENT OF USED, MODIFIED, REWORKED, OR REFURBISHED SURPLUS MATERIALS. SAAMA JUSTIFIES THIS POSITION BY STATING THAT NEW ITEMS HAVE A LONGER MEAN TIME BETWEEN FAILURES AND A HIGHER PROPORTION OF THE ITEMS ARE REPARABLE.

MOODY CONTENDS THAT THE REJECTION OF ITS OFFERS UNDER THE SUBJECT RFPS WAS ARBITRARY AND CAPRICIOUS; CONTRARY TO SOUND ECONOMIC POLICY; AGAINST THE CLEAR WEIGHT OF PRECEDENT AND PRACTICE; AND CONTRARY TO VALID SAFETY AND TECHNICAL CRITERIA. IT POINTS OUT THE AIR FORCE ADMITS THAT PROPERLY OVERHAULED AND TESTED EQUIPMENT IS CONSIDERED AIRWORTHY AND THAT IF THAT IS SO, THEN ITS USE IS TECHNICALLY SOUND, SAFE, AND IN THE BEST FINANCIAL INTEREST OF THE GOVERNMENT. MOODY MAINTAINS THAT SAAMA HAS SOLICITED USED, CERTIFIED, SERVICEABLE ITEMS FOR AIRCRAFT ON NUMEROUS OCCASIONS SUBSEQUENT TO JULY 26, 1971, THE DATE OF SAAMA-KAFB REGULATION 74-4. THE CORPORATION CONTENDS THAT TO ADOPT A BLANKET POLICY OF PROHIBITING THE USE OF USED, CERTIFIED, SERVICEABLE MERCHANDISE IS AN AFFRONT TO SOUND ECONOMY AND A VIOLATION OF THE LETTER AND SPIRIT OF ARMED SERVICES PROCUREMENT REGULATION (ASPR) 1-1208(A) AND (B).

SAAMA-KAFB REGULATION 74-4 DATED MAY 4, 1973, WHICH SUPERSEDED SAAMA KAFB 74-4, JULY 26, 1971, PROVIDES IN SECTION LA AS FOLLOWS:

"A. THIS PROCEDURE APPLIES TO THE PROCUREMENT OF NEW, UNUSED SURPLUS MATERIAL WHICH HAS NOT BEEN MODIFIED, REWORKED, OR REFURBISHED IN ANY MANNER. PROCUREMENT OF USED, MODIFIED, REWORKED, OR REFURBISHED SURPLUS MATERIAL IS PROHIBITED UNDER THIS REGULATION."

IN SUPPORT OF THE ABOVE REGULATION, SAAMA STATES IN A MEMORANDUM DATED OCTOBER 1, 1973, AS FOLLOWS:

"2. THE FOLLOWING IS SUBMITTED TO SUPPORT OUR REJECTION OF USED, MODIFIED, REWORKED, OR REFURBISHED MATERIAL:

"A. FSN 6680-526-4667, LIQUID QUANTITY INDICATOR, USED IN THE T29 AND C131 AIRCRAFT, IS A HERMETICALLY SEALED ELECTRO-MECHANICAL UNIT SUBJECT TO WEAR AND INTERNAL DEFECTS NOT READILY DETECTABLE DURING NORMAL INSPECTION AND TESTING. BASED ON THIS FACTOR AND THE IMPORTANT APPLICATION OF THE ITEM, ONLY NEW AND UNUSED INDICATORS WILL BE ACCEPTABLE, WHEN AVAILABLE.

"B. FSN 6680-223-0795, LIQUID QUANTITY TRANSMITTER, USED IN THE C 47/AC- 47/RC-47 AIRCRAFT IS AN ELECTRO-MECHANICAL COMPONENT SUBJECT TO WEAR AND DETERIORATION THROUGH USE. THE AIR FORCE WAS PROVIDED NO PREVIOUS REPAIR HISTORY OF THE ITEMS OFFERED TO DETERMINE THE ACCEPTABILITY OF SUCH REPAIRS. THERE IS A POSSIBILITY OF THE INSTALLATION OF REPLACEMENT PARTS DURING PREVIOUS OVERHAULS THAT MAY NOT BE ACCEPTABLE TO THE AIR FORCE.

"C. FSN 6680-663-5140, LIQUID QUANTITY TRANSMITTER, USED ON THE C 131B, D AND C AIRCRAFT, IS SUBJECT TO ACCUMULATION OF INTERNAL CONTAMINATION AND DETERIORATION OF VARNISH FROM USAGE ON THE INNER ELECTRODE PLATE. THE CONDITION CAN CONTRIBUTE TO ERRATIC ELECTRICAL OPERATION WHICH NORMAL OVERHAUL WOULD NOT CORRECT.

"D. FSN 6115-678-6319UH (RFP DSA-400-73-R-8189) IS AN EMERGENCY AUXILLARY POWER GENERATOR USED ON THE C-130 AIRCRAFT WHICH IS SUBJECT TO AGING OF INTERNAL INSULATION (COVERING OF WIRE AND VARNISH). IN ADDITION, THERE COULD BE A REDUCTION OF GENERATOR LIFE SINCE THE COMMUTATOR MAY HAVE BEEN MECHANICALLY 'TURNED DOWN' A NUMBER OF TIMES OR, AT LEAST, WOULD BE 'TURNED DOWN' DURING OVERHAUL BY THE OFFEROR. IN PRACTICE, THERE IS A LIMIT TO THE NUMBER OF TIMES THE COMMUTATOR MAY BE 'TURNED DOWN' WITH THE REMAINING SERVICE LIFE DIRECTLY RELATED TO THAT NUMBER.

"3. IN ADDITION TO THE FOREGOING REASONS FOR NON-ACCEPTANCE OF THE REFERENCED USED, RECONDITIONED SURPLUS MATERIAL, THERE IS NO PRACTICAL WAY TO DETERMINE THE REMAINING SERVICE LIFE OF SUCH ITEMS AFTER OVERHAUL. THEREFORE, IT IS NOT POSSIBLE TO EQUATE WITH ANY DEGREE OF ACCURACY, THE INDICATED DOLLAR SAVINGS OF THESE ITEMS WITH THE REMAINING SERVICE LIFE. ALSO, BECAUSE OF THE UNKNOWN PREVIOUS OVERHAUL HISTORY (FACILITIES THAT PERFORMED THE PREVIOUS OVERHAULS, THE NUMBER OF OVERHAULS AND WHETHER OR NOT AIR FORCE APPROVED REPLACEMENT PARTS WERE USED), PREDICTION OF FAILURES THAT COULD INVOLVE SAFETY OF PERSONNEL AND PROPERTY IS NOT POSSIBLE. FURTHER, BECAUSE OF THE HIGH COST TO THE AIR FORCE IN ATTEMPTING TO OBTAIN THE BEST POSSIBLE ENGINEERING EVALUATION OF SAMPLES BEFORE CONTRACT AWARD, AND THE LOSS OF SERVICE LIFE REFERENCED ABOVE, SHOULD THE USED ITEMS BE PROCURED, APPARENT DOLLAR SAVINGS WOULD BE MINIMIZED.

"4. ALTHOUGH WE HAVE RECENTLY MODIFIED OUR PROCEDURES TO PROVIDE FOR THE PURCHASE OF USED, RECONDITIONED OR REFURBISHED SURPLUS MATERIAL (ATCH 1), THIS CHANGE DOES NOT ALTER THE DENIALS DISCUSSED IN THIS LETTER. THIS IS BASED ON THE POLICY THAT PROCUREMENT OF USED, RECONDITIONED SURPLUS MATERIAL IS PERMITTED ONLY WHEN NEW, UNUSED MATERIAL IS UNAVAILABLE."

ASPR 1-1208, WHICH AUTHORIZES PROCUREMENT OF USED AND RECONDITIONED MATERIAL AND FORMER GOVERNMENT SURPLUS PROPERTY IN CERTAIN CIRCUMSTANCES, READS, IN PART, AS FOLLOWS:

"1-1208 PROCUREMENT OF USED AND RECONDITIONED MATERIAL AND FORMER GOVERNMENT SURPLUS PROPERTY.

"(A) GENERALLY, ALL SUPPLIES OR COMPONENTS THEREOF, INCLUDING FORMER GOVERNMENT PROPERTY, PURCHASED BY THE MILITARY DEPARTMENTS SHALL BE NEW (NOT USED OR RECONDITIONED, AND NOT OF SUCH AGE OR SO DETERIORATED AS TO IMPAIR THEIR USEFULNESS OR SAFETY). HOWEVER, THE NEEDS OF THE GOVERNMENT MAY SOMETIMES BE MET, AND ECONOMIES EFFECTED, THROUGH THE PURCHASE OF ITEMS WHICH ARE NOT NEW. SOLICITATIONS AND THE RESULTING CONTRACTS SHALL INCLUDE A CLAUSE, SUBSTANTIALLY AS SET FORTH BELOW, EXCEPT WHEN THE CLAUSE WOULD SERVE NO USEFUL PURPOSE. THIS CLAUSE IS APPROPRIATE FOR USE NOT ONLY IN SUPPLY CONTRACTS, BUT ALSO IN SERVICE CONTRACTS WHICH MAY INVOLVE AN INCIDENTAL FURNISHING OF PARTS, SUCH AS CONTRACTS FOR OVERHAUL, MAINTENANCE OR REPAIR.

"(B) IN ALL PROCUREMENTS IN WHICH THE CONTRACTING OFFICER HAS DETERMINED THAT SUPPLIES AND COMPONENTS WHICH ARE USED OR RECONDITIONED BUT WHICH FULLY COMPLY WITH THE SPECIFICATIONS AND OTHER CONTRACT REQUIREMENTS ARE ACCEPTABLE, THE SOLICITATION AND RESULTING CONTRACT SHALL INCLUDE PROVISIONS CLEARLY INDICATING THE SUPPLIES OR COMPONENTS WHICH NEED NOT BE NEW, AND DETAILS CONCERNING THEIR ACCEPTABILITY. IN DETERMINING WHETHER SUCH SUPPLIES AND COMPONENTS MAY BE PURCHASED, THE FOLLOWING CRITERIA SHALL BE CONSIDERED:

"(I) SAFETY OF PERSONS OR PROPERTY;

"(II) FINAL COST TO THE GOVERNMENT (INCLUDING MAINTENANCE, INSPECTION, TESTING AND USEFUL LIFE);

"(III) PERFORMANCE REQUIREMENTS; AND

"(IV) AVAILABILITY AND COST OF NEW SUPPLIES AND COMPONENTS (FOR EXAMPLE, OUT-OF-PRODUCTION ITEMS).

"(C) ITEMS PREVIOUSLY SOLD AS GOVERNMENT SURPLUS SHALL NOT BE ACCEPTED UNLESS IT IS DETERMINED THAT THE SURPLUS PROPERTY OFFERED FULLY MEETS THE APPLICABLE SPECIFICATIONS AND OTHER CONTRACT REQUIREMENTS. IN ADDITION, CARE MUST BE EXERCISED TO INSURE THAT THE PRICES PAID FOR SUCH ITEMS ARE REASONABLE GIVING DUE CONSIDERATION TO OVERALL COST SAVINGS TO THE GOVERNMENT WITHOUT AFFECTING QUALITY. WHERE A CONTRACT CALLS FOR MATERIAL TO BE FURNISHED AT COST, THE ALLOWABLE CHARGE FOR ANY GOVERNMENT SURPLUS PROPERTY FURNISHED SHALL BE THE COST AT WHICH THE CONTRACTOR OR HIS AFFILIATE ACQUIRED THE PROPERTY."

UNDER SUCH REGULATIONS, IN THE ABSENCE OF ANY LANGUAGE IN THE SOLICITATIONS INDICATING THAT THE LIQUID QUANTITY TRANSMITTERS AND INDICATORS IN QUESTION NEED NOT BE NEW, THE FURNISHING OF NEW TRANSMITTERS AND INDICATORS, EITHER NEW SURPLUS OR NEW MANUFACTURED, AS REQUIRED BY THE "NEW MATERIAL" CLAUSE INCORPORATED IN THESE SOLICITATIONS BY REFERENCE, WAS MANDATORY. SEE 47 COMP. GEN. 390, 396 (1968). FURTHER, THE TECHNICAL MEMORANDUM OF OCTOBER 1, 1973, VERIFIES THAT ONLY NEW LIQUID QUANTITY TRANSMITTERS AND INDICATORS WERE DESIRED BY THE GOVERNMENT. THEREFORE, SINCE THE SOLICITATIONS CONTAINED A REQUIREMENT THAT NEW SURPLUS OR NEW MANUFACTURED EQUIPMENT WAS TO BE FURNISHED, OUR OFFICE CONCLUDES THAT THE REJECTION OF MOODY'S OFFERS UNDER THE SUBJECT SOLICITATIONS WAS PROPER. ACCORDINGLY, THE PROTESTS ARE DENIED.

SO FAR AS CONCERNS THE PROPRIETY OF THE BLANKET POLICY SET OUT IN SAAMA- KAFB REGULATION 74-4, DATED MAY 4, 1973, WITH RESPECT TO THE ACCEPTANCE OF USED, MODIFIED, REWORKED, OR REFURBISHED SURPLUS MATERIAL, WE ARE RETAINING FOR USE IN CONNECTION WITH OUR AUDIT ACTIVITIES THE INFORMATION FURNISHED BY MOODY OR OTHERWISE DEVELOPED IN THE COURSE OF OUR CONSIDERATION OF THE PROTEST.